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You own a small company that already produced 600 Quick Guide to Business Terms. booklets. Production of these 600 booklets resulted in a total cost
You own a small company that already produced 600 "Quick Guide to Business Terms".
booklets. Production of these 600 booklets resulted in a total cost of $3,000. You plan to sell
them for $14each. You fully expect to be able tosell all of the booklets that you produced at the regular selling price of $14 each. A community college has offered to buy 250 ofthese booklets and pay you (see below for the amount paid to you for each, instead of $14 each) if you process further by adding a special cover with the college logo on it.
Your additional cost of adding the special college logo cover to 250 booklets would be $1,700. This is a one-time offer only and would not grow into a future, larger repeat business, and there are no other relevant issues. Thus, yourdecision is whether to accept the community college offer and process further...or not! Price that the community college has offered to pay for each booklet is $19.60 According to Managerial Accounting: A)Is the $3,000 cost to print the 600 booklets relevant toTHIS decision? (YES or NO) and explain why or why not. B) Should you accept the community college offer and process further? (YES or NO?) SHOW CALCULATIONS and a clearly identified differential in net income that would result from accepting the offer (do NOT make reviewer, i.e., instructor) hunt for it!). (hint: consider using an easy-to-follow differential analysis approach)
You own a small company that already produced 600 "Quick Guide to Business Terms". booklets. Production of these 600 booklets resulted in a total cost of $3,000. You plan to sell them for $14each. You fully expect to be able tosell all of the booklets that you produced at the regular selling price of $14 each. A community college has offered to buy 250 ofthese booklets and pay you (see below for the amount paid to you for each, instead of $14 each) if you process further by adding a special cover with the college logo on it. |
Your additional cost of adding the special college logo cover to 250 booklets would be $1,700. |
This is a one-time offer only and would not grow into a future, larger repeat business, and there are no other relevant issues. |
Thus, yourdecision is whether to accept the community college offer and process further...or not! |
Price that the community college has offered to pay for each booklet is $19.60 |
According to Managerial Accounting: |
A)Is the $3,000 cost to print the 600 booklets relevant toTHIS decision? (YES or NO) and explain why or why not. |
B) Should you accept the community college offer and process further? (YES or NO?) SHOW CALCULATIONS and a clearly identified differential in net income that would result from accepting the offer (do NOT make reviewer, i.e., instructor) hunt for it!). (hint: consider using an easy-to-follow differential analysis approach) |
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